Change in Control can mean NO COVERAGE for E&O, D&O and Fiduciary.

If you are buying, selling or re-organizing a company, make sure you pay close attention to the terms regarding “Chang in Control” or “Takeover” in your E&O, D&O and Fiduciary Liability policies. I often see questions and misunderstandings with this coverage section when a company is restructured, goes through a reverse merger, public offering, or even if two non-profits merge and change out board members.

If no action is taken ahead of time, the entity can lose coverage for any acts that occur after the change in control, and this can create a dreadful gap that could produce a costly claim.

Below is an example of the language form an E&O policy. You have to look in the coverage form and at the definitions to get the full picture. Make sure you work with a Professional or Management Liability expert, and always tell your insurance broker if you are doing any restructuring of your entities.

In the event of a Takeover of the Named Insured, coverage under this Policy shall continue until this Policy expires or is otherwise terminated, but only with respect to Wrongful Acts or Crime Loss that takes place before the effective date of the Takeover, unless:

1. the Insurer is notified in writing of the Takeover prior to the Takeover effective date and agrees in writing to provide coverage for Wrongful Acts occurring on or after such effective date, and

2. the Named Insured accepts any special terms, conditions, exclusions or additional premium charge required by the Insurer.

B. Cessation of Subsidiary

If any Insured Entity ceases to be a Subsidiary, coverage under this Policy shall continue for such Subsidiary but only for Wrongful Acts by such Subsidiary or any Insured Person or Plan of such Subsidiary occurring prior to the date such Insured Entity ceased to be a Subsidiary.

C. Transfer or Termination of a Plan

If the sponsorship of a Plan is transferred so that an Insured Entity is no longer the sole employer sponsor of such Plan or if a Plan is terminated, coverage under this Policy shall continue for any Wrongful Act by or with Respect to such Plan occurring prior to the date of such transfer or termination.

Takeover means:

1. the acquisition by another entity or person, or group of entities or persons acting in concert, of:

a. the Management Control of the Named Insured; or,

b. assets of the Named Insured resulting in the ownership of more than 50% of the total consolidated

assets of Named Insured as of the date of the Named Insured's most recent audited consolidated financial statement prior to such acquisition;

2. the merger of the Named Insured into another entity such that the Named Insured is not the surviving entity; or,

3. the consolidation of the Named Insured with another entity.

Management Control means:

1. owning interests representing more than 50% of the voting, appointment or designation power for the selection of a majority of the Board of Directors of a corporation; the management committee members of a joint venture; or the members of the management board of a limited liability company; or

2. having the right, pursuant to written contract or the by-laws, charter, operating agreement or similar documents of the Insured Entity, to elect, appoint or designate a majority of the Board of Directors of a corporation; the management committee of a joint venture; or the management board of a limited liability company.

-Martin Gill, Partner, Lee Insurance Services

Do you know what is required for 1094 & 1095 reporting due Feb. 1st 2016?

If you are a C-level executive, HR Director, or business adviser to any of those roles, you had better know what the IRS is requiring for 1094-C and 1095-C reporting. This requirement is “sneaking” up on a lot of companies and applicable large employers will be required to start reporting this information in 2016 FOR THE 2015 CALENDAR YEAR!

IRS 2015 Instructions and Forms - 1094-C 1095-C : Click Here 

Form 1095-C General Facts

Who Files?

  • Applicable Large Employers with at least one full-time employee
  • If you have multiple entities under common ownership/control, each Applicable Large Employer member must provide a 1095-C for their employees.

How Many?

  • One form to every employee who was eligible for Minimum Essential Coverage (including serving a waiting period) at any time during the year.

How to File?

  • Paper forms to employees or electronically

When to File?

  • Employee on or before the last day of January
  • For 2015 reports, deadline is February 1, 2016, since January 31 is a Sunday

1094-C Reporting to IRS

  • Similar information as reported on 1095-C (accompanying copies or summary to IRS) with some changes.
  • Electronic filing required for 250+ 1095-C filers (first draft just released for the format and transmission).
  • Deadline to file:

o   last business day in February if sending in paper form

o   last business day in March if electronic

Q. Who Will Do the Work?

  •  Payroll providers?

o   Significant gaps between payroll and benefits

o   Cost is usually an add-on or offer incomplete services

  • Software companies?

o   No experience in benefits

o   Nothing ready to go or tested in new environment

A. Innovative Agencies…YES! We have a turnkey solution and answers to all of these questions.

  • Key Questions to Ask Vendors

o    Advice

o   Who will determine Line 14 & Line 16 codes on the 1095-C?

o   Can you assist with identifying employees who should receive 1095-C?

  • Are you willing to assume liability for the preparation and advice given with 1094/1095 reporting?
  • Communication

o   Will you print and mail 1095-C to those employees who are supposed to receive it?

  • Will you correct and issue amended 1095-C’s when errors are discovered? If so, what is the charge?
  • Can you resolve IRS questions directly or is that the employer’s responsibility?
  • How can I handle employee questions that will come next February?
  • Cost

o   Flat fee or per employee per month fee?

o   If PEPM - all employees or just those employees receiving 1095-C?

o   What are the set-up costs for this service?

  • Future

o   Will you give me a way to load this information in the future for 2016 reports and years after?

Please contact me with any questions. We are standing by ready to help. This service can be accessed as a standalone product, or can be part of a benefits admin package.  

Martin Gill

Partner, Lee Insurance

Hired and Non-Owned Auto Liability: Don't Do Business Without It!

Hired and Non-Owned Auto Liability (HNO) provides coverage for bodily injury and property damage to third parties resulting from an auto accident connected to your business.

Even if your business does not own a single vehicle, there are many situations where HNO can come into play.

·         You rent a vehicle on a business trip.

·         You send an employee out to pick up lunch or office supplies.

·         Your salespeople drive their cars to a sales meeting.

The coverage is not meant to cover employees on their way to and from work. It is liability coverage for the Company in the event of an accident during the course and scope of the employee’s work.

In general, the employee’s insurance is primary and always follows the car, however, when injured third parties or their attorneys discover that the liable party for the accident was in the course and scope of work, YOUR COMPANY can become a big target, and HNO gives you a shield.

The good news is that Hired and Non Owned Auto is inexpensive coverage. Small business can add coverage for as little $80 annually.

On a commercial auto schedule Hired Autos are covered by “Symbol 8” and Non Owned autos are covered by “Symbol 9”. HNO is also covered in “Symbol 1” any auto.

If you rent vehicles for work often, you can avoid buying the Liability coverage option. You will still need to understand how your policy or company policy will react to physical damage to the rented vehicle, so purchasing the Collision Damage Waiver may be a smart idea as well.

*Risk management note: Make sure your HR team is checking to make sure that your employees that drive their own vehicle have the proper insurance. 

-Martin Gill, Partner, Lee Insurance Services

Not knowing your roof's age when buying a home can cost you big bucks!

Roof age has become an extremely important thing to consider when purchasing a new home, especially in Texas where thunderstorms can cause considerable wind and hail damage every year.

Things to be aware of when you’re looking to buy a new home:

Insuring a home with an older roof can dramatically affect the rate you receive on your home insurance premium. Insurance carriers give larger discounts for newer roofs, generally less than ten years old.

A home with an older roof can limit your options when choosing an insurance company to protect one of your most valuable assets. Some carriers will not even consider insuring a home with a roof older than 20 years.

It’s true that there are times when we discover that an older roof is in great shape. Even if the roof looks great, it’s the age that determines coverage. Many companies these days are insuring roofs older than 15 years at actual cash value and not replacement cost.  This is a big difference in claims dollars paid after a loss. Don't set yourself up for a bad surprise.

Lastly, make sure the sellers disclosure states the age of the roof. Having it in writing is important.